Survey: Workers Fuzzy On Retirement Saving

You've been thinking about that dream vacation, and are confident you can swing it - even if you don't quite know where you are going or how much it's going to cost.

When it comes to saving for retirement - the ultimate vacation for some - the situation above describes the typical American worker today.

Results of the annual "Retirement Confidence Survey" released in Washington, D.C., on Monday show that while most American workers save for retirement, they are doing it without a clear goal and without knowing how much money they will need.

Yet they expect to have more than enough to live comfortably when they retire.

This "false confidence" is a theme running throughout the survey results. American workers lack financial savvy and are deluding themselves if they think everything will somehow turn out fine in the end.

"Most workers who are saving for retirement are saving without a specific goal in mind," said Dallas Salisbury, president of the nonprofit Employee Benefit Research Institute, which sponsored the survey. "They will have enough only if they prove lucky."

Here are the numbers: Just 62 percent of American workers have saved something for retirement, and of those, only 35 percent have tried to determine how much money they'll need.

And of that group, more than half, or 51 percent, could not or would not give a dollar amount. That means only about 11 percent of all American workers said they are saving for retirement and have a specific dollar amount in mind.

Yet nearly three-quarters, or 74 percent, said they are confident they'll have enough money to live comfortably in retirement - up from 66 percent in 1994.

A similar pattern emerged in a more detailed survey conducted early in the year by the EBRI and Public Agenda, a nonprofit public opinion research organization in New York. That survey also found Americans not putting their money where their mouths were, talking about the importance of retirement planning but not doing much about it.

More false confidence from Monday's report: American workers think their lifestyle will improve with retirement, but retirees say theirs has declined after they stopped working. Among the 38 percent of workers who said they have not saved anything for retirement, 51 percent said they still expect a comfortable retirement.

But when the foot is on the other shoe, a whopping 86 percent of American workers said they think most Americans do not save enough to live comfortably in retirement.

Results since the annual survey was started five years ago show a trend toward increased confidence in our own personal ability - and responsibility - to prepare financially for retirement. Only 24 percent of Americans think Social Security and Medicare will continue to provide benefits of equal value to those received by retirees today.

"This survey shows clear signs of what may be the start of a highly significant shift toward increased dependence on individual responsibility and saving effort and toward decreased reliance on government programs," said Mathew Greenwald, president of Greenwald & Associates, the consulting firm in Washington, D.C., that conducted the survey.

But, as Salisbury noted, "as Social Security and Medicare provide less, and at later ages, it will be harder to be lucky in the future, making education increasingly important."

Helping workers understand the investment choices offered in their employer-sponsored plans, as well as the basics of financial planning, is one of the major goals. More than 110 public and private organizations have formed the nonprofit American Saving Education Council "to increase the quality and volume of education on retirement planning and saving issues," said Kathy Stokes Murray, executive director of the ASEC.

"Certainly education is at the top of the list in this area," said R. Theodore Benna, creator of the 401(k) employer-sponsored retirement plan. That means education not only in the workplace but in schools as well. "We have 5-, 6and 7-year-olds who are mastering computer games, they certainly can learn what a mutual fund or a stock is, and some of the basics of financial planning.

"This is not rocket science. Unfortunately, most individuals are intimidated by this thing called retirement planning and think it is too complex."

How much do you need to save? There is no magic formula, but many financial planners say retirees will need each year at least 70 percent to 80 percent of what they spent while they were working, adjusted for inflation. After taking pension benefits and Social Security into account, you will need enough money of your own to make up the shortfall.

How much money that is will depend on the number of years you expect to live in retirement, the rate of inflation, and the investment return you expect to make on your money.

Odds are it will be more than you think. "I have never met a retiree who said, `I have too much and don't know what I'm going to do with it,'" Benna said. "Instead, they say, `Gee, I thought it was going to be enough.'''